Asia stocks recouped losses to end higher Friday, as a larger than expected stimulus package from the European Central Bank buoyed investors' spirits. In China, the Shanghai Composite Index rose 0.2%. Hong Kong's Hang Seng Index was up 1.1%. Meanwhile, Japan's Nikkei Stock Average gained 0.5%, Australia's S&P/ASX 200 closed up 0.3%, and Korea's Kospi ended up 0.1%. Korean shares extended Wednesday and Thursday gains. The Korean benchmark index had been down for the year, but that changed when Thursday's gains pushed it into positive year-to-date territory. The Kospi is up 0.5% since the start of January. The reaction in Asia was initially muted on doubts that the ECB has enough policy tools to bolster growth and inflation in the eurozone. In the afternoon, investors appeared to reverse their outlook, sending shares higher across the region. "The market has overreacted to his statement," said Khiem Do, head of Asian multi-asset for Barings. "There's a perception that this is the end of QE [quantitative easing] and all the monetary easing that the ECB can implement. I think that this was too narrow of an interpretation." The ECB on Thursday unveiled stimulus measures that were more aggressive than economists expected. The package included expanding the scope and size of the ECB's bond purchases each month and slashing three key interest rates. Stocks initially rallied in Europe and the U.S. Thursday, but largely retreated on the disappointment that the ECB wouldn't cut rates further in the near future due to concerns about the impact to banks. In the Asia region Friday, shares closed up on hopes that easier monetary policy in Europe would encourage more bank loans to companies, ultimately boosting economic growth and increasing consumer spending, Mr. Do said. That would help the economies of Asian countries that are major exporters to Europe, he added. "Further ECB action looks unlikely until at least the second half of the year," said Colin Graham, chief investment officer of multi-asset solutions for BNP Paribas Investment Partners. "We believe fresh steps will depend on incoming data and might well reflect lessons learned from the market reaction to the latest measures." In currency markets, Chinese authorities guided the yuan to its strongest value against the U.S. dollar since December. The move was the biggest appreciation since November.
